Quotation of the Day…

by Don Boudreaux on April 16, 2013

in Seen and Unseen, Subsidies, Trade

… is from Bob Murphy’s June 2011 Freeman essay, “Don’t Worry About the Yuan“:

The standard arguments for free trade apply, even in cases where foreign governments give money directly to their exporters. For example, rather than using their revenues to prop up the dollar in the foreign-exchange market, suppose instead that the Chinese government told major Chinese exporters that they could cut their prices to foreign customers and it would make up the shortfall with tax-financed subsidies.

Note that this policy too would “destroy American jobs” in particular sectors—namely, the ones competing with the subsidized Chinese exporters—but it would generally make Americans richer. To see why, consider the extreme case, where the Chinese government used its tax receipts to buy TVs, cars, and computers from its own producers, then sent the goodies to the United States for free. This would be an unambiguous gift to the American people. If the policy persisted, the U.S. economy would adapt itself to the new reality. Particular producers might be worse off, but Americans would clearly be richer in general, just as surely as if brand new cars magically fell from the sky. The American workers who previously made the goods that we could now obtain for free would be available to produce other items, increasing the total amount of consumption possible from the same amount of labor and other resources.

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: